Philex Mining Corp.

Philex Mining Corporation (the Company) and subsidiaries are organized into two main business groupings: the mining business under Philex Mining Corporation, and the energy and hydrocarbon business under Philex Petroleum Corporation.

Philex Mining Corporation was incorporated in the Philippines in 1955 and listed in the Philippine Stock Exchange on November 23, 1956. The Company, Philex Gold Philippines, Inc. (PGPI, a whollyowned subsidiary through a holding company and incorporated in the Philippines), and Silangan Mindanao Exploration Co., Inc. (SMECI, a wholly-owned subsidiary through a holding company and PGPI and incorporated in the Philippines) and its subsidiary, Silangan Mindanao Mining Co., Inc. (SMMCI), are primarily engaged in large-scale exploration, development and utilization of mineral resources. The Company operates the Padcal Mine in Benguet. PGPI operated the Bulawan mine in Negros Occidental until the second quarter of 2002. SMECI, through SMMCI, owns the Silangan Project covering the Boyongan and Bayugo deposits in Surigao, which are currently under pre-feasibility stage.

Padcal Mine

Environmental Management

The Padcal Mine’s Environmental Management System (EMS) sustained its ISO 14001 Certification, showcasing the Company’s advocacy for responsible mining. The confirmation of the Continued Certification was based on the successful audit results of the Second Surveillance Audit by the Certification International (CI) last June 2010. Since 2002, the Company has maintained its ISO 14001 Certification, a testimony to its firm commitment to operate and mine responsibly.

The Padcal Mine was awarded First Runner-Up in the 2010 Best Mining Forest Contest (Metallic Category) nationwide under the Mining Forest Program during the 57thPhilippine Mine Safety & Environment Association’s (PMSEA) Annual Mine Safety and Environment Conference held in Baguio City on November 17-20, 2010. Since the launching of the contest in 1989 calling for the rehabilitation of areas disturbed by mining activities, the Padcal Mine has been a consistent winner, declared as champion for the years 1991, 1994, 2000-2002, 2004, 2007 and 2008.

During the year, 294,178 seedlings of various tree species were planted in the reforestation areas, of which 100,185 seedlings were planted on newly established plantation areas covering 60 hectares and 189,443 assorted forest tree seedlings were planted on the existing 345 hectares of the previously established plantation areas for enhancement. To date, about 2,000 hectares have been successfully reforested with more than 7 million seedlings of various tree species, which the Company continues to maintain and protect throughout the year. In addition, as part of the Company’s social commitment, it has also provided 8,923 planting stocks/seedlings to various civic organizations, LGUs, small-scale mining associations, schools, private Individuals, and other government agencies for their tree planting programs.

The Company also participated in the Fire Prevention Month activities in March 2010, World Water Day Celebration on March 22, 2010, Earth Day Celebration on April 22, 2010, Arbor Day Celebration on June 25, 2010 and the International Coastal Clean-up Day on September 24, 2010.

Community Development

Philex continues to be a strategic partner to its host communities towards economic development through the Company’s Social Development and Management Program (SDMP), which serves as a vehicle to attain self-reliance and sustain continuity of growth.

In 2010, the Company spent a total of P36.7 million for the continued implementation of its H.E.L.P. Program (Health, Education, Livelihood and Public Infrastructure).

Under its health care program, the Company’s Sto. Niῆo Hospital provided free basic medical and health services to 6,858 patients from the local communities. There were 2 medical missions implemented in the locality which benefited additional 144 underprivileged patients. Programs and lectures on health awareness, proper sanitation, emergency and disaster preparedness are regularly conducted every year among the local residents. In 2010, the health awareness seminar of the Company adopted the theme “Living a Healthy Life is a Thanksgiving unto Him”.

One of the Company’s flagship programs is the college and secondary educational scholarship which aims to give opportunities to deserving underprivileged students from the host communities to pursue better lives. For SY 2009-2010, 46 students benefitted from the college scholarship, and 7 out of them successfully finished their studies. At present, 79 high school students enjoy full scholarship at the Saint Louis High School-Philex. The Company also subsidizes the education of 362 elementary and high school students, mostly dependents of Philex employees. In 2010, the Company participated in the Alternative Learning System of the Department of Education (DepEd) to improve the reading and writing skills of local residents. The first batch produced 31 learners who successfully passed the DepEd national examination and were given secondary education diploma. Eighteen out-of-school youths were granted vocational scholarships by the Company to study at the Baguio School of Business and Technology College and the Philippine Institute of Mining and Quarrying.

As part of its social commitment, the Company continues to implement the Livelihood and Employment Enhancement Program with the vision of building self-reliant communities. Sixty fresh college graduates from the host and neighboring communities underwent the Work Appreciation Program at the Padcal Mine offices to gain work experience. Technical and financial supports were also provided to eight local cooperatives and livelihood associations for agroforestry, greenhouse farming, root crops production and livestock-raising projects.

Under the Company’s Public infrastructure Program, financial assistance was extended during the year for concreting an aggregate of 2.3 kilometers farm-to-market roads and construction of water systems in the host communities. In addition, the Company contributed financially in building more schools, churches and other communal structures.

Philex continues to progress in developing the various components of its Community Business Technology Centers (CBTC) launched in 2009 which aims to socially uplift its employees, their families, and the Company’s host and neighboring communities and enable them to achieve not only individual but also collective self-reliance. The Company recognizes that sustainable community-based business ventures and enterprises are critical factors in achieving this vision. The CBTC aims to help families become economically productive and able to send their children to good schools, build their own homes, support their health and leisure requirements, among their other basic needs.

The Livestock CBTC has started its operation with the establishment of the Gene Transfer Center. A total of 2 high quality boars and 15 gilts as starter breeders were already provided by the Company. Additional 100 piglets are now being raised for dispersal to would-be hog raisers/cooperators.

The Meat Processing CBTC is now in full-swing and currently producing an average of 2,000 kilograms per month of processed meat food being sold to the local communities.

Under the Coffee CBTC, a total of 1,200 robusta coffee and 300 golden shower seedlings have already been planted and currently being maintained by the local residents.

For the Aquaculture CBTC, the construction of aquaculture and sedimentation ponds is on-going.

In recognition of the Company’s CSR accomplishments, the Padcal Mine was given the 2010 Establishment with the Best Family Welfare Practices at the Workplace (Cordillera Administrative Region) Award by the Department of Labor & Employment (DOLE).

Philex Gold Philippines, Inc.

BULAWAN (Environmental Management)

During the year, PGPI has planted 33,000 various species of tree seedlings and maintained 23 hectares of tree plantations as part of the Company’s thrust for environmental protection and enhancement. The Company continues to maintain and protect the additional 10 hectares for the Assisted Natural Regeneration (ANR) Project duly accredited by the Forest Management Bureau and Mines & Geosciences Bureau. For the abandoned and completed drill sites, the Company regularly conducts environmental inspection, monitoring and rehabilitation activities, and implementation of various environmental erosion control measures to ensure stability and safety of the sites.

Communitiy Development

PGPI actively participates and supports projects for community infrastructure improvements through counterparting scheme where the Company provides construction materials and supplies while the LGUs and the local community implement the project(s) and provide the labor and management. This scheme creates a sense of responsibility to the local community and pride among the local residents once the construction projects are finished.